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Parsing Thatcherism’s legacy

Eugene Lang claims that we have moved past the supply-side economics of the Thatcher/Mulroney/Reagan era — despite Margaret Thatcher’s last act being to raise a new Community Charge tax.

First, the Community Charge simply replaced the old rates (i.e. property taxes) that were collected by the national government but doled out to the municipalities which, predictably, encouraged fiscal incontinence in local government — a situation that returned when Thatcher’s badly executed solution was abandoned by her Conservative successor.

But in general Thatcher was concerned more with balancing the books (i.e. traditionally conservative economics) than with tax cuts (i.e. classical liberal economics). Just as Brian Mulroney relied on the new GST, Thatcher increased the VAT from 7 per cent in 1979 to 14 per cent in 1990 in order to get the deficit under control.

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This was the groundwork that made possible the balanced budgets of the Chretien/Martin and Blair years. There may be lessons in this for Stephen Harper and the U.K.’s David Cameron, but probably not the ones Lang is suggesting.

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